Doha Bank, Qatar's fifth largest bank by market capitalisation, plans to leverage a AED500m ($136m) scheme targeting small and medium-sized businesses in the UAE to capture a wider share of the Gulf state’s banking sector.
The lender plans to open a second branch in Abu Dhabi within the next six months as it moves to capture an up to 10 percent share of the UAE market, said CEO Raghavan Seetharaman.
“The major handicap faced by the SMEs in UAE is the limited finance availability as loans are awarded on a name basis to limit risk exposure,” he said.
“Financing remains the greatest challenge and it needs strategic partnership between governmental departments and the private sector to tackle this problem.”
SMEs, classed as firms with up to 75 employees and a maximum turnover of AED250m, will be eligible to borrow between AED200,000 and AED5m under the Doha Bank scheme.
The lender is likely to face competition to capture a share of the market as UAE banks move to increase loans to small businesses as a means to boost profits, following the introduction of retail lending caps in May.
Under the ruling, personal loans are capped at 20 times a borrower’s monthly salary and said repayment periods can’t exceed 48 months. Overall monthly installments for all loans, including housing, auto and credit-card debt, must not exceed 50 percent of a customer’s gross salary and any regular income.
Emirates NBD, the UAE’s biggest bank by assets, said in September its lending to SMEs has grown 30 percent this year and it plans to double that business over the next three years.
Overall bank loans in the UAE, the Arab world’s second-biggest economy, grew two percent in the seven months through July, according to central bank data.
Doha Bank this month posted a 9.8 percent rise in its third-quarter net profit buoyed by an increase in net interest income and a drop in the amount set aside to meet loans and investment losses.
Net profit rose to QR308.3m ($85m) in the three months ended September 30, which compared with an average forecast from five analysts of QR310.9m.
Provisions for loan losses fell six percent to QR45.6m, while impairment provisions for investment losses more than halved to QR5.8m.
In April, Qatar's central bank limited the amount Qatari citizens can borrow to no more than QR2m ($549,254) on loans with a maximum maturity of six years and QR400,000 on loans of no more than four years.